What is Net Metering?

Net metering is a system in which excess power produced by residential renewable energy flows into the utility grid. Net metering is on the books in most states, although rules vary widely.

So, how does it work? At certain times of the day, or in certain seasons, photovoltaic panels or wind generators may produce more electricity than the house consumes, so the meter essentially runs backwards as this power is diverted into the grid. At times when the house can’t provide as much as power as its occupants need, the grid supplies the power. Currently, there is no standardization on how utilities in net-metering states reimburse residential providers or how long credited electricity will be carried on the books.

Feed-in Tariffs

The idea behind feed-in tariffs, is that every kilowatt hour produced on someone’s roof and exported to the grid is worth several times as much as each kilowatt hour that homeowner had to buy. Potentially, electricity generated by a house is worth two to three times as much per kilowatt hour as power generated by an electric utility. This system has worked very well to increase the amount of renewable energy in places like Europe, Canada, and is now being proposed in various parts of the United States.

The concept is that utilities pay more (up to 10 times as much) for their electricity during peak load periods – time there is most demand for electricity from the utility. The utility must have enough capacity to meet peak loads to avoid brownouts and blackouts.

Because the cost of expanding renewable energy resources is spread over the utility’s entire rate base, the burden of feed-in tariffs on an individual rate payer isn’t very much. Program specifics can be complicated, and rates may vary, depending on the source of renewable energy to favor small producers and forestall windfall profits from big ones.